A federal tax lien is the IRS’s legal claim to property as security or payment for a tax debt. The claim arises “automatically” under I.R.C. § 6321 and attaches to every interest in property and rights owned by a taxpayer without regard to their location.1 This statutory lien is often referred to as a “secret lien” because it arises even if not publicly recorded.2 The lien also attaches to after-acquired property other than property acquired after a bankruptcy in which taxes were discharged. Federal tax liens even attach to property exempt from seizure under state law.3 Exemption from levy under federal law does not bar a lien on the exempt property.4 The IRS may seek to enforce the lien against exempt property by a foreclosure lawsuit under I.R.C. § 7403, but this is unlikely.

If a taxpayer does not pay a bill, the IRS will generally send a Notice of Federal Tax Lien which demands payment within 10 days.5 The Notice will threaten the filing of a tax lien in the public records office if the bill is not paid.6 A tax lien is not self-enforcing. To enforce a tax lien, the IRS must administratively levy the property or income or bring a foreclosure suit under I.R.C. § 7403.

• 1Drye v. United States, 528 U.S. 49 (1999).
• 2IRS Chief Counsel Memorandum, No. 200634012 (June 23, 2006).
• 3Drye, 528 U.S. 49; Medaris v. United States, 884 F.2d 832 (5th Cir. 1989).
• 4Matter of Sills, 82 F.3d 111 (5th Cir. 1990).
• 5IRS personnel are directed to file liens for tax debts that are $10,000 or more and may file for lesser debts.
• 6Note that the filing of a lien on a taxpayer’s home may trigger a technical default if the mortgage has a “‘no lien” clause.

Because a lien attaches to inherited property, renunciation of an inheritance won’t defeat the lien. It will still attach to the property despite Louisiana succession law that allows for renunciation that defeats creditors’ claims.1 If the IRS has filed a lien in the parish conveyance records, attempts to evade payment by transferring the property with a donation or renunciation could be construed as fraud.

• 1Drye v. United States, 528 U.S. 49 (1999).

A taxpayer may appeal a Notice of Federal Tax Lien by filing a Form 12153 within 30 days.1 Grounds for appeal include:

• IRS noncompliance with law or administrative procedures2
• Spousal defenses, such as innocent spouse relief
• Challenges to the appropriateness of collection actions
• Collection alternatives such as an installment agreement or an Offer in Compromise (OIC)3
• Assessment of tax or filing of lien while a bankruptcy stay was in effect
• Expiration of the time to collect the tax prior to the lien
• Taxpayer’s opportunity to dispute the asserted liability
• Full payment of taxes before the lien was filed

Lien appeal decisions by the IRS Appeals Officer are reviewed by the Tax Court under an abuse of discretion standard. The petition for judicial review must be filed within 30 days.4

• 1See 26 C.F.R. § 301.6320-1.
• 2In a “CDP” appeal, check for compliance with all applicable I.R.M. procedures. See Murphy v. Comm’r, 125 T.C. 301, 307 (2005).
• 3If a taxpayer appealing a lien seeks an OIC, the IRS Appeals agent will then transfer the case to the IRS office that processes OICs. Unlike with a “standalone” OIC, the denial of an OIC as part of a lien appeal can be judicially reviewed by the Tax Court. For a complete discussion of Offers in Compromise, see Section 7.3.
• 4I.R.C. §§ 6320(c), 6330(c)–(e). Joint Comm. on Taxation, Summary of the Conference Agreement on H.R. 2676, No. JCX-50-98R, at 132 (June 24, 1998).

There are several ways to remove an IRS lien.

Release–I.R.C. § 6325(a). A recorded lien can be released if the tax liability is satisfied or becomes legally unenforceable.1 A lien becomes unenforceable upon expiration of the 10-year statute of limitations for collection unless the IRS brings timely suit and wins judgment, at which point the lien is extended indefinitely.2 Since the 1980s, the IRS has used “self-releasing” liens that contain the date that the lien is released due to the 10-year statute of limitations. This date may not be correct, however, as the taxpayer may take actions that toll the statute of limitations, such as filing a bankruptcy or submitting an Offer in Compromise. The tax attorney should calculate when the liability becomes legally unenforceable after reviewing the account transcript of all actions taken by the taxpayer. If needed, the IRS will issue a certificate of release within 30 days after the lien is paid or becomes legally unenforceable, but the taxpayer must request the certificate. Absent a request, the IRS will not take action to cancel or release a lien and will instead rely on the expiration date listed on each lien. IRS Publication 1450 explains how to request a certificate of release.

Surprisingly, taxpayers often don’t know whether the lien has been satisfied or has expired. You may be able to review the actual lien in the public records; in Louisiana, these records are maintained by the Clerk of Court for each parish. Information on the lien’s payment status can also be obtained from the IRS lien staff or from an IRS account transcript. Inquiries about routine lien releases and current payoff amounts can be made to IRS customer service unit, 800-913-6050.

Withdrawal–I.R.C. § 6323(j). A withdrawn lien is treated as if it never existed. The IRS may withdraw a lien if the filing was premature or made in violation of administrative procedures or if the liability is being paid through an installment agreement or an Offer in Compromise.3 If these conditions are met, a Certificate of Release of Lien (Form 668Z) may be obtained from the IRS and filed in the public records. If the lien was filed in error, the IRS Certificate of Release should so state to minimize damage to the taxpayer’s credit rating.4 Use Form 12227 to request a withdrawal of a lien.

Discharge–I.R.C. § 6325(b). A discharge may be sought by a taxpayer who wants to sell or refinance a specific property. The taxpayer will have to agree that the tax liability will be paid at the time of sale/refinancing, with a check going directly to the IRS. If the taxpayer owns property with co-owners, only the taxpayer’s share of the proceeds will be affected. A certificate of discharge can also be issued if the taxpayer’s other property has value double of unpaid balance secured by lien, the taxpayer pays the value of interest IRS has in the property, or the taxpayer agrees that proceeds of sale will be substituted for the property (while parties sort out priorities of their claims). Use Form 14235 to discharge a lien on a specific asset.

Subordination–I.R.C. § 6325(d). Liens may be subordinated to a lender or other creditor. Subordination is a process whereby the IRS allows a creditor to move ahead of the IRS’s lien position. For example, the IRS may consent if the property will be mortgaged, and the funds used to pay the tax liability. IRS Publication 784 sets forth the procedures for the subordination of federal tax liens. To obtain a certificate of subordination, contact the IRS Advisory Group Manager for your area. The addresses can be found in IRS Publication 4235. Request subordination by filing a Form 14134 along with supporting documents.

Non-attachment–I.R.C. § 6325(e). A certificate of non-attachment states that the lien does not attach to the property of a person. This procedure is used when your client is not the person who owes the taxes but is being hurt by the lien because that person has the same or a similar name.5

• 1I.R.C. § 6325.
• 2I.R.C. §§ 6322, 6502(a); Markham v. Fay, 74 F.3d 1347, 1353 (1st Cir. 1996).
• 3I.R.C. § 6323; Internal Revenue Serv., Pub. No. 1468, Guidelines for Processing Notices of Federal Tax Lien Documents (2014).
• 4I.R.C. § 6326(b).
• 5See Internal Revenue Serv., Pub. No. 1024, How to Apply for a Certificate of Non-Attachment of a Federal Tax Lien (2016).